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GABORONE, Botswana (miningweekly.com) – Two of Botswana’s diamond cutting and polishing factories have closed and half of them have had to retrench and downsize.

Speaking at the thirteenth Botswana Resource Sector Conference here, Botswana Diamond Hub executive Mmetla Masire said that most of the factories were driving defensive strategies of liquidation, downsizing and retrenchment.

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Owing to the price margin between rough diamonds and polished diamonds narrowing, some sightholders were also failing to collect their parcels from their boxes.

In such instances, Botswana’s diamond beneficiation hub had been left with a larger diamond inventory than anticipated.

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“We’ve had a situation where the margin has diminished and it has become very tough for cutters and polishers to make any money,” Masire told the conference attended by Creamer Media’s Mining Weekly Online.

He said that credit facilities had tightened, financial liquidity had reduced and the conclusion had been reached that none of the three key participants – the Botswana government, diamond sightholders and De Beers – could achieve success alone but had to synergise and work together.

“It’s not us and them anymore because we’re in this together,” said Masire.

Botswana’s 20 remaining cutting-and-polishing factories were processing $1-billion worth of diamonds a year and the government was considering both integration and diversification to improve the situation.

Using the number of people employed as the measure of success had been jettisoned and it was now acknowledged that many other factors had to be taken into account as well.

While the country had always tracked the price of rough diamonds, it now also needed to track the price of polished diamonds and a big picture approach had to be adopted and global challenges mitigated.

Masire conceded that Botswana had not fully appreciated the complexities of beneficiation and the rigidity the government exercised at the outset has now given way to greater flexibility, with more carrot and less stick.

“We have a responsibility to ensure that diamonds are processed in Botswana but also have a responsibility to ensure that those processing them are profitable,” Masire added.

Comparatively higher labour costs were exacerbating the issue of depressed polished prices set against high rough prices and importing rough from South Africa, Namibia and Canada for aggregation puts a strain on Botswana's balance of payments position.